Black gold in the Gulf

On April 16, Newsday, the Long Island newspaper, published a
startling report that old oil fields in the Gulf of Mexico were somehow
being refilled. That is, new oil was being discovered in fields where it
previously had not existed.
Scientists, led by Mahlon Kennicutt of Texas A&M University,
speculate that the new oil is surging upward from deposits well below those
currently in production. "Very light oil and gas were being injected from
below, even as the producing was going on," he said.
Although it is not yet known whether this is a worldwide
phenomenon or commercially important, the new discovery suggests that there
may be far more oil and gas within the earth's core than previously thought.
Kennicutt is not the first to suggest that vast hydrocarbon
deposits may lie well below those currently known. In 1995, The New York
Times reported that geochemist Jean Whelan of the Woods Hole Oceanographic
Institution in Massachusetts had also found evidence that oil was moving
upward into reservoirs from somewhere far deeper.
With growing improvements in technology that are making possible
oil drilling at greater and greater depths, it may soon be economically
feasible to explore and produce oil from these deep deposits.
The existence of oil much farther below the surface than it was
previously thought to exist raises new questions about the origins of oil
and natural gas. It has commonly been thought that they are the decayed
remains of long dead plants and animals. However, as hydrocarbons are found
at extreme depths, this explanation becomes increasingly implausible.
Astronomer Thomas Gold of Cornell University has long been
dissatisfied with the dead dinosaur theory of oil's origins. He argues that
oil and gas are in fact the remains of methane left over from the earth's
origin. Methane, he points out, is one of the most common minerals in the
universe. When the stars and planets were formed eons ago, it was one of the
central building blocks from which matter formed.
If Gold's theory is true, then it makes sense that we would
continue to find hydrocarbons everywhere within the earth's core, and not
just at the surface, where plants and animals exist. Thus the new research
is at least consistent with Gold's theory, even if it still remains to be
proven.
The new scientific evidence that energy supplies may be vastly
greater than previously imagined is only the latest blow to the doomsayers.
Such people have been around for 200 years, preaching that mankind has
reached the limit to growth because we have found all the oil there is to be
found. For at least a century, for example, the U.S. Geological Survey has
consistently reported that America had only about 10 years worth of oil
left.
In defense of the Geological Survey, it was referring only to
proven reserves. These are fields that have been explored, and where
estimates have been made regarding their size and production potential. But
of course, exploration is a continuing process, so that new reserves are
discovered all the time.
Economist Julian Simon long made the point that the size of
proven reserves cannot be divorced from the price of oil. At current price
levels, only about 40 percent of oil can be extracted from existing fields;
the remaining 60 percent, which is known to exist, cannot be produced
economically and is therefore not included in proven reserve estimates.
However, higher prices and advanced technology can easily make it profitable
to expand production in existing fields.
Higher prices also encourage exploration into areas that
geologists strongly suspect to have oil, but where drilling costs are too
high at present. Only a small portion of the earth's surface has ever been
explored for oil, and there is no reason to believe that there are not many
large deposits yet to be discovered.
If oil were really becoming more scarce, we would expect to see
prices rising over time. But in fact, the real price of oil, adjusted for
inflation, has been remarkably stable at around $15 per barrel. Temporary
prices spikes by OPEC have not proved sustainable because they brought forth
new supplies, encouraged substitution of oil with coal or gas, and
stimulated conservation by consumers and businesses.
In short, even if the new scientific evidence about oil is
wrong, one can still say that the world will never run out of it. Higher
prices will always bring new supplies to market. As Bjorn Lomberg points out
in his new book, "The Skeptical Environmentalist" (Cambridge University
Press), $40 per barrel oil will immediately increase world reserves from a
40 years supply to 250 years because vast known oil shale deposits will
become economically viable.
Of all the things we have to worry about in this day and age,
running out of oil should not be one of them.

Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.

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